Corporate growth and the unexpected triumph of central planning

The Growth in the Relative Importance of the Large Corporation in American Economic Life

... If recent rates of growth were to continue, 80 per cent of non-financial corporate wealth would be in the hands of 200 corporations by ...

... Six industries can boast of one or more "billion dollar" companies ...

Yeah, that said "billion", not "trillion". The article was published in March 1931, so it was presumably written after the crash of '29 but before the full horror of the Great Depression was recognized.

... Businesses have also been getting bigger. A snapshot of the American economy shows huge dispersion in firm size: around a third of American workers are employed by one of the 6m small firms with fewer than 100 workers, and another third are employed by one of the 980 large firms that have over 10,000 workers. But the long-run trend seems to be towards bigger companies. In a 1978 paper Robert Lucas of the University of Chicago documented how average firm size in America had increased over a 70-year period (see left-hand chart)...

... In the past 15 years the assets of the top 50 American companies have risen from around 70% of American GDP to around 130% (see right-hand chart). All of the top ten American firms have been involved in at least one large merger or acquisition over the past 25 years...

... If size does not keep driving down costs, why do big firms keep expanding? One possibility is that they are seeking to boost profits not by driving down costs but by raising prices. Buying up rivals softens competition and enables firms to charge more...

And that, surprisingly, is how we end up with the unexpected triumph of central planning.

Central planning triumphs because, even if we ignore regulatory capture and senatorial acquisition, corporations are only capitalist on the outside of the cell membrane. Inside the corporation there are no contracts, no currencies, and no markets. Inside the corporation, we have the hallmarks of Soviet central planning - goals and quotas and commissars and imaginary numbers and dictates from the central commission.

Central planning, of course, has its issues. Persistent and eventually fatal issues. When very large corporations fail though, they take a lot of things down with them. If there are truly systemic dysfunctions associated with corporate size, and if large corporations now subsume a large portion of national economic activity, the impact of these weakened monsters may be considerable.